CBO Economic Projections : Politics or Truth?

The question now is how politicized is the report? Finding the truth these days is not an easy task. One thing for sure, the economy is not going in the right direction and must be turned around if we are to survive as a nation.

If this isn't important to you then remember, for your own sake, the decisions you will make this year will be decisions that will change all of our lives for the foreseeable future.



(From the National Center for Policy Analysis)
The Congressional Budget Office (CBO) released the latest economic projections this week. Among other things, the CBO estimated that the federal deficit will surpass $1 trillion for the fourth year in a row, the economy will remain sluggish, and unemployment will increase in the short term.

Lest anyone in Congress feigns surprise, this year’s economic projections are not all that different from last year’s projections.

Under current law, over the next 10 years, the CBO estimates that the projected deficit will significantly shrink because the 2001 and 2003 tax cuts (often called the “Bush tax cuts”) are set to expire at the end of this year. If the tax cuts are allowed to expire, the government will see a substantial increase in tax revenue.

However, it is becoming common in Washington for these types of reports to include an “alternative scenario.” The CBO uses current law as the basis for its projections, but current law doesn’t always reflect reality. For instance, current law calls for a 27% cut in Medicare doctor payments---a very unlikely scenario. So, the CBO report also includes an “alternative scenario” to describe the economic outlook if Congress makes expected changes to current law. The “alternative scenario” assumes that the 2001 and 2003 tax provisions will be extended, the alternative minimum tax will be indexed for inflation, the Medicare doctor payments will be held constant, and the $1.2 trillion in automatic spending cuts invoked by the failure of the Super Committee will not take effect. Under the “alternative scenario,” deficits would remain very high for the foreseeable future.

Furthermore, the CBO paints a dire picture for federal health care spending. Even if Congress were to allow the 27% cut in Medicare doctor payments, the CBO estimates that overall Medicare spending will still increase 90% over the next 10 years. That is driven, in large part, by an increasing number of Baby Boomers who will become eligible for Medicare over the next 10 years. The CBO estimates that Medicaid spending for the poor is also expected to double, primarily because the program was dramatically expanded under the 2010 health care reform law.

The CBO does not provide policy recommendations to Congress. However, Treasury Secretary Timothy Geithner suggested that our economic future depends on world events that are out of our control, and “whether Republicans in Congress decide they want to legislate things that are good for growth in the short term.” In other words, more stimulus spending.